GE says former Panametrics owners' lawsuit is "without merit"
General Electric Corp. (GE, Fairfield, CT) denied any wrongdoing April 18 in connection with a $25-million federal lawsuit filed against it April 1 by the former owners of Panametrics Inc. (Waltham, MA), which GE bought last summer for $220 million plus assumed liabilities. David Chleck and Dr.
General Electric Corp. (GE, Fairfield, CT) denied any wrongdoing April 18 in connection with a $25-million federal lawsuit filed against it April 1 by the former owners of Panametrics Inc. (Waltham, MA), which GE bought last summer for $220 million plus assumed liabilities.
David Chleck and Dr. Edmund Carnevale, Panametrics' founders and former co-chairmen and majority stockholders, are charging GE with securities fraud, breach of contract, and deceptive business practices in its acquisition of Panametrics on July 24, 2002. The plaintiffs are seeking at least $25 million in compensatory damages, plus punitive damages from GE.
Dennis Murphy, GE Power Systems' manager of global marketing communications, told Control Engineering on April 18 that, "Our position is that the sellers are trying to literally make a federal case out of what is a routine commercial dispute. The signed contract for this acquisition allows renegotiation of the purchase price after the closing is done. Absent a lawsuit, a third party usually conducts an audit, evaluates claims from the parties involved, and then decides how much each should receive from funds held in an escrow account. Now it's the federal court that will decide."
Murphy added that he couldn't comment on what GE is seeking to get back in its claim in the audit. "As for this lawsuit, we feel that it is totally without merit. The wording was very strong, and so we also totally reject any implication that there is any integrity flaw on our part, and we stand by the claim made in the audit," says Mr. Murphy.
The lawsuit, filed in U.S. District Court's New York Southern District, alleges that GE regularly engages in a pattern and practice of inducing business owners to sell their companies to GE without disclosing that it has a policy of systematically resorting to post-closing tactics, such as using false statements, accounting manipulations, and other techniques, including manipulation of accounts receivable, to avoid paying the agreed purchase price.
After buying Panametrics, GE Power Systems added it to GE's Energy Management Services business and renamed it GE Panametrics. A manufacturer of ultrasonic testing equipment and process control instrumentation, Panametrics was founded in 1960 and had more than 1,000 employees at the time it was acquired.